Taking the bank overdraft as per passbook as the starting point,the am...
Added because passbook overdraft mean debit balance of pass book so it will be debit
Taking the bank overdraft as per passbook as the starting point,the am...
Answer:
To determine whether the amount of cheques issued but not paid should be added or deducted from the bank overdraft as per the passbook, we need to understand the concept of a bank overdraft and how it relates to cheques issued.
Bank Overdraft:
A bank overdraft is a financial arrangement provided by a bank to its customers, allowing them to withdraw more money from their bank account than they currently have available. It is essentially a negative balance in the account, where the customer owes the bank money.
Cheques Issued but not Paid:
Cheques issued but not paid refers to the situation where a customer has written cheques to pay for goods or services, but the bank has not yet processed those cheques or the funds in the account are insufficient to cover the amount of the cheques.
Determining the Treatment:
In order to determine whether the amount of cheques issued but not paid should be added or deducted from the bank overdraft as per the passbook, we need to analyze the impact of these cheques on the customer's account balance.
1. Cheques Issued: When a customer writes a cheque, it is considered a liability for the bank as it has an obligation to pay the amount mentioned on the cheque to the recipient. Therefore, the amount of cheques issued should be deducted from the bank overdraft, as it reduces the customer's liability to the bank.
2. Cheques Not Paid: If the cheques issued by the customer are not paid by the bank due to insufficient funds or any other reason, it means that the customer still owes the recipients of those cheques. Hence, the amount of cheques not paid should be added back to the bank overdraft, as it increases the customer's liability to the bank.
Conclusion:
Based on the analysis above, the correct treatment for the amount of cheques issued but not paid is to add it to the bank overdraft as per the passbook. This adjustment is necessary to reflect the customer's actual liability to the bank and provide an accurate representation of the account balance.
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